Funding against card takings when you trade in your own name
Sole traders are among the businesses this product suits best commercially. Independent hairdressers, barbers, market traders, mobile therapists, single-site cafes, takeaway operators and one-person retail shops all share the pattern funders look for: income arriving daily through a card terminal, no assets worth charging, and a bank that finds the accounts too small or too informal to lend against.
The practical appeal is the same as for a limited company. Nothing is secured against property, the decision rests on merchant statements rather than filed accounts, and collection flexes with trade rather than landing as a fixed monthly direct debit. For an unincorporated business that is often the difference between accessible funding and none, because a sole trader's balance sheet frequently says nothing useful about how well the trade actually performs.
What changes is not the commercial logic but the legal framing. A limited company is a separate legal person, so the agreement is between the funder and the company. A sole trader is the business, so the agreement is with you personally, and the law treats certain agreements with individuals differently from agreements with corporates. That is not a reason to avoid the product. It is a reason to understand what you are signing more carefully than a company director needs to.
The Consumer Credit Act question for unincorporated businesses
This is the part of the subject most providers skate over, and it is worth setting out properly. Nothing here is legal advice, and the analysis turns on how a specific agreement is drafted, so take independent advice on your own paperwork.
The starting point is that the Consumer Credit Act 1974 defines an individual widely. It covers a natural person, and it also covers a partnership of two or three persons where not all of them are bodies corporate, along with certain other unincorporated bodies. So a sole trader and a small partnership can be an individual for these purposes, even though they are plainly running a business.
The second point is the business-purposes exemption. Under the regulated activities legislation, a credit agreement entered into by a borrower wholly or predominantly for the purposes of a business is exempt from regulation only where the credit exceeds £25,000. That threshold is the crux of it. Above £25,000 and demonstrably for business purposes, a business credit agreement with a sole trader is generally exempt. At or below £25,000, that particular exemption does not apply, and an agreement that constitutes credit could be a regulated credit agreement even though the borrower is unmistakably a trading business.
The third point is the one that keeps this genuinely uncertain: whether a given merchant cash advance constitutes credit at all. Structured strictly as a purchase of future receivables, with the funder taking the commercial risk that those receivables never materialise, the argument runs that no credit is being provided and the Consumer Credit Act does not engage. Structured with features that look more like lending, such as a personal obligation to make good any shortfall, the analysis can look different. Funders take different views, and that is precisely why some will not offer advances to sole traders below £25,000 at all, while others do so under Financial Conduct Authority permissions with regulated documentation.
What this means in practice is simpler than the law behind it. Ask the funder directly whether it is treating your agreement as regulated or unregulated, and get the answer in writing. If it is regulated, you should expect pre-contract information, a right to withdraw, statutory statements and access to the Financial Ombudsman Service, and the funder should hold the appropriate FCA authorisation. If it is unregulated, none of that follows and the contract is doing all the work.
Which funders will look at a one-person trade
Appetite for unincorporated businesses is genuinely mixed, and knowing where a case will be welcome saves a great deal of wasted effort.
- Funders that accept sole traders readily. Several specialists in advances against card takings, including names such as Liberis and 365 Business Finance, have long worked with small high street businesses where sole trader status is the norm rather than the exception.
- Funders with a threshold. Some will consider unincorporated businesses only above a certain advance size, which is frequently set around the £25,000 mark for the regulatory reason described above.
- Funders that decline outright. A number of providers, including some acquirer-embedded programmes, restrict funding to limited companies purely to keep every agreement outside the consumer credit perimeter.
- Acquirer programmes. Terminal providers such as SumUp, Dojo and Worldpay serve very large numbers of sole traders, but whether their funding products extend to unincorporated customers varies by programme and changes over time.
The consequence is that a sole trader who approaches a single funder and is declined has learned very little, because the refusal may have been about legal structure rather than about the business. The panel that matters here is narrower than the one available to a limited company, which makes matching the case to the right funder more valuable, not less. We cover the wider market on our merchant cash advance lenders page.
Incorporating purely to widen the funder panel is occasionally the right move, but it should be a decision about your business rather than about one funding application, and it carries tax and administrative consequences worth discussing with your accountant first.
Personal liability and what you are actually committing to
There is no corporate veil in an unincorporated business, and this is the point sole traders most often underestimate.
When a limited company takes an advance, the agreement is with the company. Directors are frequently asked for a personal guarantee, which brings their own assets into play, but that is a separate document with its own negotiation. When a sole trader takes an advance, you are the counterparty from the outset. There is no guarantee to negotiate because there is nothing to guarantee: the obligation is already yours personally, and it sits against your personal assets in the same way any other personal obligation does.
Read three things carefully before signing. The first is the definition of card takings, which determines exactly what the holdback bites on and whether it follows you if you change terminal provider. The second is what happens if the business stops trading. A pure receivables purchase places the risk of the takings not materialising on the funder, but many agreements contain covenants about continuing to trade, not diverting card volume elsewhere, and not selling the business without consent. Breach of those can convert a commercial risk the funder took into a personal debt you owe. The third is enforcement: what the funder can do, in what order, if collection stalls.
None of this makes an advance a bad idea for a sole trader. It makes the paperwork worth an hour of proper attention, and worth a conversation with a solicitor or accountant if the sum is significant relative to the business.
Advance sizes and cost for an unincorporated business
Sizing works the same way it does for a company: roughly one month of card turnover, so a mobile therapist processing £4,000 a month is looking at something near that, while a busy single-site takeaway on £30,000 a month is looking at a materially larger figure. The overall market runs from about £5,000 to £500,000, and sole trader cases most commonly land between £5,000 and £50,000.
Cost is expressed as a factor rate rather than an interest rate. A factor rate of 1.3 on a £15,000 advance means £19,500 is delivered back in total, fixed on day one and unaffected by how long collection takes. Rates across the market typically fall between 1.1 and 1.5, and sole trader cases often sit in the middle or upper part of that band, for two reasons that have nothing to do with the individual: the advances are usually smaller, and the funder panel is narrower, so there is less competitive pressure on price.
Collection is a fixed percentage of daily card sales, typically 5 to 20 percent, running every trading day until the purchased amount has been delivered. Most agreements complete within four to eighteen months, flexing with trade. For a one-person business the holdback percentage deserves particular scrutiny, because there is no payroll buffer and no other income stream: whatever the split takes each day comes straight out of the money you live on. It is worth taking the time to work the total through a cash advance calculator and then look honestly at what the remaining daily figure supports.
The general qualifying tests apply to sole traders as they do to companies: usually three or more months of card processing history and roughly £2,500 a month in card takings. Those are set out in full on our merchant cash advance eligibility page, and if your credit record is impaired, the position is covered under bad credit merchant cash advance.
Partnerships, and where the line is drawn
Partnerships occupy a middle position that is worth understanding, because the treatment changes with the number of partners and with whether any of them are companies.
A partnership of two or three individuals can fall within the same definition that captures sole traders, which means the Consumer Credit Act analysis described above may apply to it in the same way. A partnership of four or more generally falls outside that definition and is treated more like a corporate counterparty. A limited liability partnership is a body corporate in its own right, so it sits outside the individual definition entirely and is dealt with as a company would be. Where a partnership includes a corporate partner, the position depends on the composition, and it is another point to check rather than assume.
Commercially, funders treat small partnerships much as they treat sole traders. Liability is typically joint and several, meaning each partner can be pursued for the whole obligation rather than for a share of it, so the decision needs all partners genuinely on board rather than one partner signing on behalf of the others. Where the partnership operates from premises with a shared terminal, funders will also want to understand how takings are recorded and whether any partner processes separately.
Whichever structure you trade through, our guide to what a merchant cash advance is covers the mechanics in full and is worth reading before you commit. We are an arranger and introducer, not a lender, and we are not authorised by the Financial Conduct Authority. Nothing on this page is legal advice, and the regulatory treatment of any particular agreement should be confirmed with the funder and, where the sum matters, with your own adviser.
How we structure it
The first question we settle on a sole trader case is which funders will actually look at it, because that is a different and shorter list than the one available to a limited company. Placing an unincorporated business with a funder that quietly restricts advances to corporates wastes a fortnight and produces a decline that tells the client nothing about their own business. We know where the thresholds sit and where the appetite genuinely is, so the case goes to funders who can write it.
The second is the regulatory question, and we ask it directly rather than leaving it in the small print. We want to know whether the funder is treating the agreement as regulated or unregulated, what authorisation stands behind it, and what that means for the client's rights if the relationship goes wrong. Sole traders are frequently sold this product with the corporate explanation attached, which is not the same explanation, and putting the position in writing before signing is the difference between an informed decision and an assumption.
Beyond that, the structuring focuses on the holdback. A one-person business has no payroll cushion, so a split set two or three points too high is felt immediately and personally. Matt Lenzie reads each of these cases himself, negotiates the split against the actual daily takings rather than the monthly average, and where the advance would leave too little in the business to trade on, says so instead of placing it.
Related
- Merchant cash advance requirements: what UK funders ask for
- A small business merchant cash advance, arranged against your card takings
- Merchant cash advance lenders: who funds UK card-taking businesses
- Merchant cash advances with bad credit, and what no credit check really means
- Salon funding from appointment takings
- What is a merchant cash advance?